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Keep it secret, keep it safe

Having the right discussions, airing ideas and leveraging contacts are integral to start-up success.

This will inevitably involve sharing secrets with others. Some of these – such as mentors – you might trust implicitly, but others, like investors or service providers, will be relatively unknown to you.

If you want to stop people competing with you unfairly – like by copying your business plan – the only IP right that will help you is secrecy.

Secrecy, or confidentiality, is a very fragile concept and requires proper steps to be taken at every stage. Use a template confidentiality (or non-disclosure) agreement, or at the very least get it agreed in writing beforehand (e.g. by email) that your meeting and correspondence will be confidential.

If you decide something will be a secret, record the identity (not the secret) in a register, with creation dates and names of the people you have told. That helps (1) persuade investors that you have an asset that can be monetised and (2) address infringement if someone else uses it in future.

Most importantly, if you have decided something is a trade secret, never disclose it unless you’ve agreed confidentiality beforehand. Secrecy is free, but it only takes one slip up to destroy the whole process.

What are trade secrets?

According to the 2018 Trade Secrets Regulations, for information to be considered and protected as a trade secret it must:

  1. be secret in the sense that it is not, as a whole or a collection of parts, generally known among, or readily accessible to, people who normally deal with the kind of information in question
  2. have commercial value because it is secret, and
  3. have been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

What is confidential information? Is there a difference?

Before the 2018 Regulation was implemented, UK businesses had to rely on case law decisions which outlined how confidential information could be protected. The new rules on trade secrets are incredibly important, and they also replace the previous case law on confidential information. The important thing is (3) above – reasonable steps needs to be taken to keep information secret, for the information to be protected. To help your business achieve this, you might want to think about creating a trade secrets policy. That’s something we can help you with.

Why is this important to my business?

If you’re reading this, you’ll have started an entrepreneurial journey which may contain a number of pioneering ideas and concepts, challenging the norm and looking to break away from the status quo. However any good idea or new product takes time to develop in full, with many iterations, tests, revisions and discussions necessary to reach the end goal. These tests, trials and discussions will often need to be shared, to some extent, with your selected partners, to help you progress your business.

Potential inventions are easy to spot in the tech field, but for companies involved in recipe development or R&D, sometimes the results of the hard work are much more incremental. That said, tech businesses can also benefit from using confidential information – unlike a patent, there is no expiry date and you never have to disclose this information, if you choose not to.

How does this apply in practice?

Think of it this way, Coca-Cola and KFC are incredibly successful food businesses who have been able to maintain and preserve the information surrounding the creation of their products. Only a select group know how to make the specific blend of ingredients for the soft drink or mix the seasoning for the chicken. With KFC, the recipe is divided between three individual groups who do not work together – so no one person holds all the pieces of the puzzle. The Coca-Cola recipe is locked in a bank vault.

By keeping these recipes and processes secret, they’ve been able to dominate the global market and set their product apart in terms of quality and taste. Others may imitate, whether by reverse engineering the product or guessing what’s in there, but they cannot produce a direct copy. That means that any competitors trying to poach their business will always be second best, and consumers will know it.

It’s important to remember that these companies can’t stop other people doing a cola flavoured drink, or producing Kentucky fried chicken – that’s just a concept and it’s not possible to exclusively own an idea. But their recipe and processes are trade secrets. By stopping other people knowing the secret they have preserved their business model and secured their market dominance.

What happens if a trade secret is disclosed?

Keeping your trade secrets on a strictly need to know basis will ensure that you can get to market as successfully as possible. If trade secrets are disclosed or made public (to anyone outside the business who is not bound to keep it confidential) your business could be in serious trouble. You could lose the ability to get a patent for your inventions (either products or processes), which means you may lose a significant business asset and first mover advantage in the marketplace.

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